CMS proposes sweeping changes to regenerative medicine reimbursement framework

Most dramatic among CMS’s potential changes is the proposal regarding reimbursement of therapies administered in the physician office setting. Starting in calendar year (CY) 2024, CMS proposes to stop separately paying for skin substitutes in physician offices. Rather, payment for skin substitutes would be packaged into the payment for the associated administrative procedure — which could have dramatic implications for Medicare payment in such physician office settings.

For the hospital outpatient department setting, CMS’s proposals are less sweeping. CMS does not propose any changes for CY 2024. For CY 2023, CMS proposes to continue its existing reimbursement policy, which ties skin substitute reimbursement to high/low payment categories based on the cost of the product. However, CMS does propose to retire a special C-code — C1849 — that the agency adopted in 2021 to describe certain synthetic skin substitutes, and CMS also proposes certain other changes impacting skin substitutes furnished in hospital outpatient settings. In addition, it is unclear if CMS may adopt additional changes in future years’ rulemakings, especially given that CMS’s proposed rules include language suggesting that CMS’s ultimate objective is to ensure greater uniformity in payment policy across both the hospital outpatient and physician office settings of care.

For both physician office and hospital outpatient department settings, CMS also proposes changes to the code set used for skin substitutes. Historically, skin substitutes have usually been assigned Q-codes. Starting in CY 2024, however, CMS is proposing to transition to instead use A-codes, including converting existing Q-codes to A-codes. Although the transition to A-codes under CMS’s proposal would be automatic for most skin substitutes, if an HCT/P skin substitute currently has a Q-code, CMS would require an application for a revised code, which would necessarily require a recommendation letter from the Food and Drug Administration’s (FDA) Tissue Reference Group.

If finalized, CMS’s various skin substitute proposals would mark a sea change in how Medicare treats this class of regenerative medicines, especially in physician office settings. Members of industry, patients, providers, and other stakeholders have an opportunity to submit comments on CMS’s skin substitute proposals. Both CMS’s physician office and hospital outpatient department proposed rules have 60-day comment periods, and stakeholder feedback can influence whether CMS finalizes its proposals, makes modifications, or withdraws or delays implementation of the proposed changes.

CMS seeks comments on its proposed Medicare Physician Fee Schedule through September 6, and on its proposed Outpatient Prospective Payment System through September 13, 2022. If you have any questions on reimbursement for regenerative medicine products, or may wish to submit a comment on the proposals discussed above, you may contact either of the authors of this alert or the Hogan Lovells attorney with whom you generally work.

This article is the thirteenth in our 2022 series, “Trends in Cell, Tissue, and Gene Therapies,” which aims to help you stay informed about the broad array of legal and regulatory issues affecting companies operating in the regenerative medicine space. From clinical studies, to obtaining patents, to scaling up manufacturing, our global team will discuss novel issues arising in all parts of the world, including unique deal-making, litigation, and inspections concerns for CTGT companies. Ensure you are subscribed to Hogan Lovells Engage to receive these new insights weekly!

Authored by Beth Roberts and James Huang